The recent restructuring at Victrex gives a clear view of the conflicting fortunes of the two sides of the group's business. Invibio, a supplier of the biomaterial PEEK-Optima to the medical device industry, is doing well, with sales up 51 per cent and operating profit 47 per cent higher at £10.4m. Growth here has been driven by the successful commercialisation of new applications. In the past decade, more than 2m devices containing PEEK-Optima have been implanted in patients.
However, Invibio's strong performance was offset by lower demand for its PEEK plastic polymer material (VPS), which is used chiefly by the auto, aerospace and electronics industries. Sales of PEEK have been hard hit by the downturn in world automotive manufacturing and aerospace, although demand from the oil and gas industry has proved more resilient. Victrex also had to buy out surplus forward exchange contracts at a cost of £9m, so VPS first half profits collapsed from £20.5m to just £0.5m on revenues down from £56.9m to £29.7m.
Still, PEEK sales volumes started to pick up in April and the improvement has been maintained in May. Invibio continues to see strong sales growth and Victrex will have good exposure to the cyclical upturn in auto and aerospace demand when it comes.
Even so, full year forecasts have been trimmed by around 5 per cent given the continuing squeeze on margins with brokers now expecting pre-tax profits of £22.6m and EPS of 19.7p (£55m and 47.8p, respectively, in 2008).
| VICTREX (VCT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 517p | MARKET VALUE: | £ 429m | |
| TOUCH: | 516-517p | 12-MONTH HIGH: | 829p | LOW: 371p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 191p | NET CASH: | £14.2m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2008 | 68.5 | 27.2 | 23.7 | 5.2 |
| 2009 | 47.4 | 10.2 | 8.8 | 5.2 |
| % change | -31 | -62 | -63 | - |
Ex-div:10 Jun Payment:07 Jul | ||||
